Question

Use the following information to answer the questions below: note: all sales are credit sales Income Stmt info: 2017 2018 less Cost of Goods Sold: Gross Profit Operating Expenses Earnings before Interest & Taxes Interest exp earnings before Taxes Taxes Sales 1,000,000 1,100,000 424,000 676,000 365,750 310,250 25,500 284,750 113,900 400,000 600,000 350,000 250,000 225,000 90,000 Net Income S 135,000 170,850 12/31/18 30,000 51,000 125,000 131,250 200,000 212,250 300,000 S315,000 500,000 527,250 12/31/17 Balance Sheet info: Cash Accounts Receivable Inventory Total Current Asset:s 25,000 S 50,000$ 1Fixed Assets (Net) Total Assets Current Liabilities Long Term Liabilities 110,000121,000 180,000188,000 290,000$ 309,000 6 Total Liabilities Stockholder's Equity 210,000S 218,250 8 Total Liab & Equity: $500,000 527,250

Answer 1

Name of ratio	Formula	2017	2018	Industry average	Good/Bad analysis
Profit margin	Net profit/Sales	13.5%	15.53%	11%	It is increasing in 2018 and it is better than industry average
Current ratio	Current assets/current liabilities	1.81	1.75	1.90	It is decreasing in 2018 and worse than industry average.
Quick ratio	(Cash+Receivables)/current liabilities	.68	.67	.66	It is almost same in both the years and industry average.
Return on asset	Net income/Total assets	27%	32%	28%	It is increasing in 2018 and it's better than industry average.
Debt/Asset	Total liabilities/Total assets	.58	.58	.50	It is almost same in both the years but worse than industry average, lower ratio is good.